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Navigation for Some Thoughts on Klout as a Business - Dare Obasanjo's weblog

Last month I read Mike Arrington’s Why I Changed My Mind On Klout (And Invested) and thought to myself that I’d similarly changed my perspective on the much maligned social influence measuring service, Klout. My road to changing my mind on Klout was due to two unrelated sets of occurrences.

The first step to changing my mind were the high profile acquisitions of Vitrue by Oracle for $300 million and Buddy Media by Salesforce for $689 million. Both companies were sold for hundreds of millions of dollars for building enterprise versions ping.fm, tools for managing a company’s social media profile across social networks like Facebook, Twitter and Google+. The lesson from these is that just because something sounds dumb as a consumer play doesn’t mean it isn’t a great enterprise play. More importantly it made clear that helping companies figure out social media is a serious business.

The second incident contributed to my rethought perspective on Klout was Facebook's acquisition of Karma. Karma was co-founded by Lee Linden after his initial success with Tapjoy which grew to a company with a $100 million in revenues. Lee was a friend of mine during his Microsoft days and I can still remember him as this hyperactive guy who couldn’t stop talking about starting his own company and taking advantage of the opportunities in the industry. I remember him telling me about his idea for a mobile startup that would be an ad exchange which would help mobile devs maximize the revenue they got from ads in their free apps. I thought the idea had a low barrier to entry but don’t remember actively pointing that out. A few pivots later, the idea evolved into a pay-per-install ad network that was pulling in a $100 million a year. The lesson from this was that once a good team actually learns the challenges particular businesses face in an area, they can pivot their product to better serve those customers.

So how do these things apply to Klout? Klout tries to figure out who the experts are at particular topics in various social networks. This is valuable to at least two interesting players

Social CRM products: The companies acquired by Oracle and Salesforce now can sell products to companies that help them better manage their Facebook and Twitter profiles but there is still a missing piece. The next logical step is helping companies figure out who their most valuable followers are on those sites and helping them target those customers. Helping a local business like the Pro Sports Club in Bellevue (for example) to figure out a one stop shop for creating and posting to a Facebook, Twitter and Google+ is cool. But even better would be telling them which of their customers they should give a few perks who they could be confident have a lot of “clout” with their audience on things like fitness recommendations. Helping the Pro Sports Club find the budding Jillian Michaels in their customer base would be worth a ton of money to them.

In short, after thinking about it I’m convinced Klout provides a valuable service that is worth a lot of money to certain players in the industry. That said, as a social media user I do think it’s unfortunate that there is a service that provides a score for one’s participation in social media since it creates a set of incentives that may lead to unsavory behavior that harms the ecosystem as a whole.